December’s added jobs miss estimates; unemployment falls
WASHINGTON — The U.S. economy sent more confusing signals in December, adding a lower-than-expected 199,000 jobs while pushing the unemployment rate down to a new pandemic low, according to the Department of Labor’s monthly jobs report. Wages rose sharply.
It was the second month where job growth came in well below expectations — economists had forecast more than 400,000 jobs added in the month — while the unemployment rate sank, from 4.2% in November to 3.9%. That means unemployment is nearing what was a 50-year-low of 3.5% achieved in February 2020.
“The unemployment rate is a reliable barometer, and it’s going down fast,” said Julia Coronado, founder of the research firm MacroPolicy Perspectives. “It does speak to not having enough labor supply to meet demand — not faltering demand.”
Employment growth for the month came from leisure and hospitality, which added 53,000 jobs; professional and business services, which added 43,000 jobs; manufacturing, which added 26,000 positions; construction, adding 22,000 jobs; and warehousing and transportation, with 19,000.
The report is a snapshot of the economy from the earlier part of December, before the omicron surge had begun in force, so it does not capture any effects from the latest wave of cases.
Job growth is expected to take a hit this month because of the omicron variant, which has sickened millions of Americans, forced airlines to cancel thousands of flights, reduced traffic at restaurants and bars, and caused some major school systems to close, potentially keeping some parents at home with children and unable to work.
That stands to make it even harder for companies to remain fully staffed and could slow the economy, experts say.
Omicron has forced so
many workers to call in sick, it’s disrupting businesses ranging from ski resorts to airlines to hospitals. The wave of infections is also likely weighing on jobs at restaurants and bars.
In interviews Friday, many economists said they felt that the report was stronger than the top-line jobs figure. But the numerous economic forces unleashed by the pandemic in 2020, including inflation, labor shortages and supply chain woes, continue to weigh on the labor market and make it hard to predict what will happen next.
“The headline number was disappointing but it is good to see the unemployment rate tick down to a pandemic low,” said Odeta Kushi, economist at First American Financial Corp.
The two numbers are calculated from different surveys that are released in the same report: The jobs-added figure comes from a survey of businesses, while unemployment comes from a survey of households. The two surveys are generally aligned but also occasionally tell divergent stories, like the past two months.
The December report sums up a year of historic growth in the labor market.
The country averaged adding 537,000 jobs per month in 2021, making for one of the best years for the labor market in U.S. history. The market is still down by 3.6 million jobs from its pre-pandemic levels in February 2020, but gained back some 6.4 million jobs on the year. Record numbers of Americans have quit their jobs to find alternatives with better pay and benefits.
HIGHER PAY
The shortage of workers is forcing businesses to pay more, contributing to a resurgence of inflation. Hourly wages rose 4.7% over the past year. In the leisure and hospitality sector, including restaurants and hotels, hourly pay shot up 14.1% from December 2020.
President Joe Biden touted the jobs figures, as well as the yearly haul in a news conference Friday: “Today, America is back to work and there are more historical accomplishments,” he said. “There’s been a lot of press coverage about people quitting their jobs. Well, today’s report tells you why: Americans are moving up to better jobs with better pay and better benefits.
“This isn’t about workers walking away, refusing to work. It’s about workers able to take a step up, provide for themselves and their families,” Biden said.
LEAVING THE WORKFORCE
Still, more than 2 million Americans have left the workforce entirely during the pandemic, causing the country’s participation rate to sink. The pandemic prompted many people to retire early, stay home to care for children or family members, or avoid jobs with significant risks of exposure and wait for the public health picture to improve.
Economists have been waiting for the recovery to entice some of those people back into the labor force, but the participation rate stayed flat for the month. It rose over the year from 61.4% to 61.9%, but remains well below the 63.4% from February 2020.
When broken down demographically, groups that saw modest declines in the participation rate in December included men, Black men, and Asian and Hispanic people. The unemployment rate increased for Black workers, as well.
The new labor market numbers come as polls continue to show that voters disapprove of Biden’s handling of the economy, as concerns about inflation and labor shortages overshadow other achievements. Inflation has been rising by its fastest pace in 40 years. And employers in many industries have complained about trouble finding workers at the wages they want to pay.
There have still been some positive indicators recently. The Institute for Supply Management manufacturing survey continues to register strong numbers, indicating in its December report that
In interviews Friday, many economists said they felt that the report was stronger than the top-line jobs figure.
the manufacturing sector continued to grow, and that slowdowns from labor and material shortages appeared to be lessening somewhat.
Another monthly Department of Labor survey, about job turnover and openings has been reporting record numbers of workers changing jobs and job openings at various points of the past year. The most recent report, showed that a record 4.5 million workers changed jobs or quit in November — the fourth time that number had hit a record in 2021.
The data is a reflection of how leverage has tilted toward workers during the recovery, as companies and businesses race to out-compete one another with wages and bonuses to address a scarcity of available workers.
FEELING IN DEMAND
Dantavius Enescu, 27, a software developer in Phoenix, accepted a new job with a database management company in December after two months out of work. The new position comes with a significant raise, he said, and is for a more prestigious company.
He felt in demand for his brief stint out of work, saying he was getting more interviews and interest than he ever had before. And the number of places offering remote work, a preference for him, had drastically increased since his previous job search from right before the pandemic began.
“It’s a positive thing,” he said, of the new labor market dynamic.
The number of new weekly unemployment claims have fallen below pre-pandemic numbers in recent weeks, with the four-week average around the time the jobs report was gathered reaching a record not seen since 1969. Those numbers have remained low in recent weeks, indicating that many companies are likely hanging onto workers even if they are running into head winds from the coronavirus surge.
Information for this article was contributed by Eli Rosenberg of The Washington Post; by Paul Wiseman and Christopher Rugaber of The Associated Press; by Sydney Ember and Jeanna Smialek of The New York Times; and by Don Lee of the Los Angeles Times.